Real Property

We currently represent 30 golf courses in the state of California. To learn more about our services watch this video. 

Types of Property Tax Appeals in California

For California Properties with few exceptions there are basically two categories of appeals:

Decline In Value

• Prop 8 requires the County Assessor’s Office to annually assign either a property’s “Prop 13” trending value or its current market value as of January 1, whichever is less.
• This process does not create a “new factor basis year," meaning your tax liability could rise in subsequent years after you have won your appeal for prior years.
• These appeals typically apply to one year only.

Base-Year Appeal

• These appeals are for the newly assessed values that arise during a change of ownership or new construction.
• Applicants must file an appeal within 60 days of receiving a “supplemental bill” for the property. However if they file after the 60 days it can negatively impact the refund they can receive.
• Unlike a “Prop 8″ appeal, these appeals establish a factor base value of the property ownership history. Often the Assessors Office designates a higher value than the actual purchase price value of the new construction.

Possessory Interest

Possessory interest cases have tax stipulations and liabilities that apply to businesses that lease government land for private use. For example business that operated in a city-owned airport is considered possessory interest property, and the valuation process is normally unique and complex.

Possessory interest valuation uses the three conventional approaches to value – sales comparison, income and cost. However, the use of any of these three approaches must consider the fact that the property will revert back to the public owner at some point. This “reversion” value must be removed so that the taxable value reflects only the lessee’s portion of interest.

The most common type of possessory interest is the lease of land and/or improvements from a public owner. Typically, the public owner charges a rent to the lessee on a dollar per square foot basis, or it may require the payment of a percentage of the lessee’s revenue or income.

For valuation of these types of possessory interests, the use of the direct income approach is appropriate and requires a discounting of the economic rent through the full term of the lease contract (net present value), less the expenses paid by the public owner. By calculating the net present value of this income stream to the public owner, only the lessee’s portion of value or interest is considered. Therefore, it is unnecessary to remove a reversionary value for the lessor’s portion of interest.

Example / Pertinent Data:

• Five year lease for thousand square foot office
• Rent at $3 per square foot per month
• Lessee pays all expenses, net lease
• Use 10% discount rate for income stream, based on recent market data
• Use 3% expense deduction to income for lessor’s administrative expense

Possessory interest properties can be very complex. For detailed information about your specific situation, contact us today to discuss your options and see how we can help you with your property tax appeal.